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The Process of Selling a Dental Practice

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BE PREPARED, message on business note paper, computer and coffee on table

The sale of a dental practice is one of the most important events in your professional career. If handled properly, it should also be a rewarding and profitable transaction for all parties involved. To ensure a successful transition, it is important to follow these crucial steps:

  • Begin the planning process three to five years in advance of a transition. There are countless ways to sell a dental practice. Therefore, it’s important to meet with a local practice transition consultant/broker to determine the best transition strategy to meet your individual goals leading up to and following the sale. Another advantage of beginning the process three to five years before a sale is the ability to address and correct issues that could have a negative impact on practice value, thus ensuring that you maximize the value of your practice upon the sale and position the future practice owner for success.
  • Once you have selected a transition strategy and prepared your practice for sale, you are now ready to initiate the transition process. The first step in this process is to collect all of the information required for your practice broker to determine the market value of your office: practice reports, financials, office lease, equipment list, pictures, etc. Upon establishing the value/asking price, your broker should construct a comprehensive practice profile that will be utilized to confidentially market the practice to prospective buyers.
  • When you sell a dental practice, maintaining confidentiality during the transition process is extremely important. Your broker should require all potential buyers to complete a confidentiality agreement prior to receiving any information regarding your office. The broker should also oversee all communication with potential buyers and their advisors and handle initial practice showings after office hours. Should a buyer determine your practice is a good fit after reviewing the profile and visiting the office, a follow up meeting will likely be arranged to allow both doctors to get to know each other.
  • The next step is to find the right dentist for your practice. To sell a dental practice, some brokers will simply list a description of your practice in various journals and their website with the hope of coming across a good fit. This approach doesn’t cut it! To ensure that prospective buyers are a fit for your office, it is extremely important that your broker work diligently to cultivate relationships with all prospective buyers to understand their needs, goals, and skill set and match them with the appropriate practice. By taking a more hands on approach, the broker is more likely to find a quality buyer in a shorter amount of time.
  • Once an ideal buyer has been located, the next step in the process is to agree on the terms of the purchase in a Letter of Intent, which should detail the proposed purchase price, intended closing date, assets included in the sale, and a list of contingencies that have to be met before the transition is completed.
  • Upon agreeing on the terms of the sale, the next step in the process is for the buyer to secure financing. Since most buyers will require 100% financing, it is important that they work with lenders who are familiar with dental transactions. It is equally important that the practice broker help position their loan request in a favorable light with each lender to give the buying dentist a strong change of securing the level of financing requested. This involves understanding each lender’s unique underwriting requirements, presenting a comprehensive practice prospectus and cash flow analysis, and proactively addressing any potential red flags up front.
  • While navigating the financing process, the buyer will also be completing their due diligence on the practice. This typically involves meeting the selling doctor, reviewing patient charts and practice reports, inspecting equipment, and consulting with an accountant to evaluate practice financials.
  • The most important document involved in a dental practice sale is the Asset Purchase Agreement, which serves as the legally binding document detailing the terms of the sale. This document should be specific to a dental transition and be a win-win agreement that protects both sides and discusses how common issues, such as accounts receivables and credit balances, will be handled after the sale occurs. It is imperative for each party to hire their own legal counsel (with experience in dental transitions) to review the APA and other agreements involved with the sale.
  • In addition to the APA, the buyer will need to negotiate an assignment of the existing office lease or negotiate a new lease with the building landlord. It is important to consider the requirements of the lender when negotiating the lease term and to approach the landlord at the proper point in the transaction to protect confidentiality while not delaying the closing.
  • As the closing date approaches, the buyer, seller, and broker will work closely to ensure that all the details of the transition are completed prior to closing, including transferring/establishing service provider accounts (utilities, phone, etc.), PPO credentialing, drafting a transition letter that will be mailed to active patients upon closing, and ensuring the lender receives all necessary documentation to fund on the closing date.
  • Throughout this process, the staff and patients are typically unaware that the dental practice is being transitioned to a new doctor. The reason for this is simple: to protect the goodwill of the practice. Selling a dental practice is an emotional process for any doctor because of the relationships developed with their patients and staff over the years. Timing of this introduction, how the initial meeting is handled, and training the staff to explain the transition to patients is a critical step in ensuring a smooth transition of ownership and maximum patient retention following the sale.

While this article covers the most significant steps required to sell a dental practice, it is by no means comprehensive. Each practice transition is unique and presents its own set of challenges to overcome during the closing process. Therefore, it is imperative to be educated about the process and employ the services of experienced professionals (broker, attorney, accountant, etc.) to help you navigate the process and protect this value asset and ensure a successful transition for all parties involved.


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